Dear Doug – An Open Letter to Doug McMillon, the New President & CEO of Walmart

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By now you’ve been in the corner cubicle in beautiful downtown Bentonville for a few weeks, so congratulations on being only the fifth president in the history of Walmart. It’s a big job, running the largest retailer — hell, the largest anything — in the world and you’ve got millions of employees and billions of customers depending on you to do a good job.

No pressure, really.

But you also sit in perhaps the most revered seat in American retailing, the one once occupied by Mr. Sam himself, the man whose name is over the front door, the guy who put most of the stores in the United States out of business, and the hovering spirit who continues to both inspire and haunt everything and everybody at Walmart. But Doug, you and Sam Walton also have one other thing in common: you’re the only merchants ever to run Walmart.

And therein lies the greatest hope for a very troubled company. You see Doug, as you know better than anybody, Walmart is not quite what it seems to be. You know how certain businesses appear to be one thing and are actually another? Like movie theaters fronting as places to show films when in fact they are giant popcorn and snack emporiums? Or furniture stores appearing to be selling couches and credenzas when they are really finance companies charging usury rates that would embarrass organized crime?

Well, that’s what you’ve inherited with Walmart. It masquerades as a retailer when the business it’s actually in is logistics. And it’s damn good at it too. The best in the world. But your job, Doug, is to turn Walmart back into a retailer.

Logistics is Not Retailing

You’ve got your work cut out for you. You see it’s something your three predecessors were poorly equipped to do. Think about it, Doug. When Sam Walton realized his declining health meant he needed to turn the company over to someone else, he chose David Glass, who came out of the operations side. The top-ranking merchant at the time, Jack Shewmaker, was passed over.

And so the die was cast. Glass passed the Bentonville baton to Lee Scott, who at one time ran the trucking company Walmart used and whose specialty was logistics. Next up was Mike Duke, your immediate predecessor, whose background was in – wait for it – logistics.

You don’t need to be a supply chain manager to see what happened to Walmart over the past two decades. The logistics got better and better while the merchandising got worse and worse. Walmart is able to get mediocre merchandise to its store better than anybody. Of course, once it reaches the loading dock out back, the whole thing collapses.

Walking the Home Department

Come with me, Doug, to the home department of a typical store, and let me show you some examples of what you need to fix on the merchandising side. Take your flagship Better Home and Gardens program. It’s actually pretty well done as these things go. There’s a nice assortment of soft home products across the bed and bath spectrum. The branding is prominent and while burgundy was last a fashionable color in the late 1990s, the packaging is at least consistent. But cross the aisle to housewares and you’ll need a real estate agent to find Better Homes. Offerings in cooking products and other homewares are few and far between. If you’ve got a great brand, one that is acutely aligned with your core demographic, why wouldn’t you carry it across as many merchandising classifications as possible?

Let’s walk over to the towel department Doug. You’ve got a four-tier program, five if you count the $1.97 opening price pointer that is more paper towel than terry towel. At $2.97 you’ve got Mainstay, your core private label program that is…well, your mainstay. A buck up is Essential at $3.97 and one more above that is the Better Home & Gardens towel at $4.97.

So far, so good, Doug.

But then you take a leap the size of an Olympic swimming pool to $9.97 and Select Edition. Aside from a name that has all the cache and prestige of the Acme Towel Company, your top-of-the-line product is twice as expensive as the one below it.

Can you explain that Doug? There’s a reason the good-better-best ridiculously overpriced strategy is not widely employed these days.

But Wait, There’s More…or Less

But there are lots of other things I can show you that don’t make much more sense:

  • Point-of-sale signage is terrific on the toasters and electric cooking appliance shelves but virtually non-existent right across the aisle for microwaves.
  • Speaking of microwaves, do you really need 15 different SKUs on the selling floor? Isn’t that a tad excessive?
  • How about trying out a chair or sofa in the furniture department? Sure, if you’re 12-feet tall and can climb onto the chest-high platforms where most of the furniture is displayed. Well, who really wants to sit on a couch before they buy it anyway, right?
  • The particular store we’re in has five mattresses on display. Not five different SKUs. Five mattresses, stacked on their ends, still in the shipping carton they came in and displayed in the middle of the racetrack aisle. That’s the mattress department, the entire mattress department. Talk about your ultimate impulse item.
  • Then there’s the DVD and CD department. It’s HUGE. Doug, have you heard of this thing called Netflix? Or maybe iTunes? For a retailer that prides itself on sales-per-square-foot-productivity, this has got to be about the least productive space this side of the ladies room.
  • You’ve also got some adjacency issues I’m afraid. I saw sheets in about five different places in the department, separated by all sorts of other products and, in one case, opposite an assortment of leftover Super Bowl paraphernalia. Same thing for rugs, which seem to have taken the concept of scatter a little too literal. Decorative pillows are next to the luggage. Clocks seem to be stuck in the middle of no man’s land.
  • Finally there’s your “Everyday Low Prices” signage. It’s everywhere, harking back to the days when “Always Low Prices” was the Mart mantra. But, Doug, it is in fact everywhere. It’s so everywhere that it ends up being wallpaper, background Muzak that I bet most shoppers tune out sooner rather than later.

I could go on and on, Doug, but I know you’re a busy guy and you’ve got a lot on your plate being new in the job. But here’s the thing: the job you have has been unfilled since 1992. That’s when Sam Walton died, 22 years ago in April. That’s the last time Walmart was truly a retailer. Because after all Doug, if you’re going to be a retailer, doesn’t it make sense to have a retailer running the place?

Warren Shoulberg is editorial director of several Progressive Business Media home furnishings publications and considers his one meeting with Sam Walton in 1991 one of the most memorable moments of his career.



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